LONDON: Greek government bond yields rose sharply and the country's stock market came under pressure on Wednesday, following news that a meeting on Greek reforms has been delayed.
Most euro zone bond yields were lower, with the overall tone in markets cautious as two risk events loomed large - a Federal Reserve interest rate decision later on Wednesday and a Bank of Japan meeting on Thursday.
Euro zone finance ministers will not meet on Thursday and need more time to discuss two sets of Greek reforms that would unlock new loans, the office of the Eurogroup said late on Tuesday.
The meeting was a possibility because Greece and its lenders aim to reach an agreement on a package of contingent measures that would be implemented only if needed, to make sure the country reaches agreed fiscal targets in 2018.
"It is the latest twist in a very difficult course," said Chris Scicluna, head of economic research at Daiwa Capital Markets.
Euro zone finance ministers should meet on Greece within days to avoid renewed uncertainty over the country's ability to finance itself, European Council President Donald Tusk said on Wednesday.
Greece's 10-year bond yield rose more than 50 basis points to 9.14 percent, on track for its biggest daily rise since February 8.
The country's benchmark ATG equity index fell almost 4 percent, underperforming a 0.2 percent gain on the broader, pan-European STOXX 600 index.
NEW ELECTIONS IN SPAIN
Spanish bonds briefly came under pressure as fresh elections appeared likely after a final round of talks to form a coalition government failed.
Acknowledging the failure of political parties to break a deadlock triggered by inconclusive elections in December, King Felipe on Tuesday said he would not propose any new candidate for Prime Minister, thus paving the way for the new vote on June 26.
Opinion polls suggest new elections would do little to resolve the impasse.
"It's not a surprise that we'll see new elections after the lengthy and tedious negotiations to form a government," said DZ Bank strategist Christian Lenk. "The problem markets have not really digested is that polls point to a similar election outcome to what we saw in December."
Spain's benchmark 10-year bond yield fell 3 bps to 1.61 percent, reversing an initial rise. Analysts said a firmer tone in stock markets helped boost sentiment towards peripheral bond markets in general.
Most euro zone bond yields were slightly lower although moves were limited ahead of the Fed's rate decision.
The U.S. central bank is expected to keep interest rates unchanged as it monitors the impact from weakening global growth but may seek to signal it is determined to resume policy tightening this year.
"If the Fed tweaks its statement that could have some additional negative impact on bond markets," said KBC rate strategist Mathias van der Jeugt.
Elsewhere, Germany sold about 800 million euros of 30-year bonds.
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